While higher education financial executives feel that their sector lags other industries and should operate more like a business, only 51% of those responding to a Kaufman Hall survey said their institutions have agreed-upon key performance indicators (KPIs) used to measure and communicate financial health, up slightly from 2019 (44%). This is just one of the key findings in Kaufman Hall’s report: Higher Education Financial Trends: Priorities, Challenges, and Insights to Get Ahead in 2020.
According to a news release budget and finance executives also are concerned that financial reporting and management are trending in the wrong direction — 43% of higher education institutions have budget cycles that last more than six months, up significantly from 34% in 2019. Although long budget cycles themselves are not necessarily an issue, 19% of institutions with such cycles do not reforecast throughout the year. That means budgets submitted in the fall may be outdated by summer, with no ability to adapt or react to current needs.
“Higher education is under a microscope more than ever before, with scrutiny around its cost, necessity, and viability,” said Kermit S. Randa, chief executive officer of Kaufman Hall Software in the news release. “To address questions about the price of a degree and whether students get a fair return as costs escalate, financial and academic leaders need better transparency into their performance and where the money is going. They want to ensure every dollar is spent wisely and adopt a more businesslike approach to financial performance, but our survey results show that little progress is being made toward this critical goal.”
In addition to survey findings, the report includes feedback from a panel of five higher education budget and finance professionals from Community College of Rhode Island, Lane Community College, University of Rochester, and the University of Arizona, who offer insights and advice about the data, according to the news release.
Using Data More Effectively
One of the issues facing colleges and universities is that they have been slow to adopt powerful data-driven tools and processes. Most (76%) believe that higher education technology lags other industries, down slightly from 2019’s 82%. Only 16% felt it was on par with other industries, and just 8% felt higher education leads, the news release stated.
When asked whether their institutions use predictive analytics to support financial planning activities, roughly 28% said yes, almost even with those who said it’s not a current objective (26%). Nearly half (47%) answered that it’s a longer-term goal, but not something they’re currently using or pursuing. Of those who said they are engaged in using predictive analytics, 94% use it to predict tuition revenue, 58% for enrollment optimization, and 52% for performance-based budgeting estimates, the news release continued.
When asked where they felt reporting and analysis improvement are most critical, their answers fell into three main categories: making access to accurate data easier; connecting disparate systems to enable all data to roll up to a single view, and increasing the overall ease of use to demystify the financial information that managers and staff receive.
Respondents said the top five planning and analysis initiatives to improve upon in 2020 are:
- Operational budgeting and forecasting (73%)
- Reporting and analysis to support decision-making (70%)
- Long-range financial planning (67%)
- Capital planning and tracking (51%)
- Post-award grant management (24%)
One other major concern throughout the history of the Kaufman Hall financial higher education survey has been the sustainability of the institution. The respondents felt good about their teams’ abilities to quickly and easily make adjustments to strategies and plans, with 65% saying they’re somewhat confident and 15% very confident, and overall positive sentiment increase of 17%. Only 21% said they’re not at all confident, which is down by 13% from 2019.
Additionally, when asked if current business models at their institutions were sustainable for the next five to 10 years, 60% said yes, a 26% increase over the 2019 survey. Yet given the lack of change in their approaches, there are questions as to whether this confidence might be misplaced. Making the transition to viewing all financial data in one place will be important to match the expectation with the reality, the news release added.
The third annual report is based on data from an online survey completed in September and October 2019 by budget and finance professionals from a range of higher education institutions, including four-year, two-year, public and private colleges and universities. Download a copy of Higher Education Financial Trends: Priorities, Challenges, and Insights to Get Ahead in 2020.
Source: Kaufman Hall